[ONCE A TAXPAYER DENIES RECEIPT OF THE BIR'S ISSUANCES, THE BURDEN OF PROOF RESTS UPON THE LATTER TO PROVE THAT THESE ISSUANCES HAVE BEEN ACTUALLY RECEIVED] [PERSONAL SERVICE OF THE FAN/FLD, UNSUPPORTED BY ANY PROOF, CANNOT BE CONSIDERED VALID SERVICE]

Petitioner Ugong Trade and Holdings Inc. filed a Petition for Review seeking the cancellation of the Respondent Commissioner of Internal Revenue (CIR)’s Warrant of Distraint and/or Levy (WDL) and Warrant of Garnishment (WG), which were issued to collect alleged deficiency taxes for the taxable year 2017. The Petitioner argued that the assessments were void for improper service of the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN)/Formal Letter of Demand (FLD), making the enforcement measures invalid. It also claimed that the assessment is time-barred under the three-year prescriptive period. Additionally, it denied liability for the alleged deficiency taxes. On the other hand, the Respondent countered that the Court has no jurisdiction because the Petitioner failed to file a timely and valid protest, causing the assessments to become final. Respondent also stressed that tax assessments are presumed correct, and since Petitioner failed to rebut this presumption, the assessments should be upheld. In ruling, the Court held that the Respondent failed to prove proper service of the PAN and FLD/FAN. When a taxpayer denies receipt, the burden is on the Bureau of Internal Revenue (BIR) to show actual mailing and receipt through competent evidence, such as registry return cards or official certifications. Respondent’s evidence, such as registry receipt, courier receipt, and testimony, was insufficient and did not establish valid service, nor was there proof that the person who allegedly received the FAN was authorized to do so. Thus, the assessments were declared VOID for failure to comply with due process requirements. Consequently, the WDL and WG were CANCELLED. [UGONG TRADE & HOLDINGS INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10761, JANUARY 27, 2026]

FRANCHISE TAX, BEING A TAX ON THE EXERCISE OF A PRIVILEGE, IS TAXABLE AT THE PLACE WHERE THE PRIVILEGE IS EXERCISED

The Petitioner, the Local Government Unit (LGU) of Camarines Sur, filed a Petition for Review seeking to overturn the CTA Special Decision which affirmed the ruling of the Regional Trial Court declaring Naga City as the sole LGU authorized to impose and collect Franchise Tax from the Respondent Camarines Sur II Electric Cooperative (CASURECO II) over its entire service area. The Petitioner contended that Franchise Tax is territorial in nature and, since the nine (9) municipalities where CASURECO II operates are within the territorial jurisdiction of Camarines Sur, the province should be the proper taxing authority. In contrast, the Respondent argued that the City of Iriga doctrine governs, maintaining that Franchise Tax is an excise tax imposed on the exercise of privilege. Thus, the proper situs of taxation is the place where the privilege is exercised, or the location of the Respondent’s principal office, which is in Naga City. In ruling, the CTA En Banc held that the City of Iriga doctrine applies, emphasizing that Franchise Tax is imposed on the exercise of a privilege rather than on the location of customers or operations. The situs of taxation is the principal office where the franchise is exercised. Since the Respondent’s principal office is located in Naga City, only Naga City is authorized to levy and collect Franchise Tax on all its gross receipts, including those derived from the nine (9) municipalities in Camarines Sur. The Petition was therefore DENIED. [THE LOCAL GOVERNMENT OF CAMARINES SUR VS CAMARINES SUR II ELECTRIC COOPERATIVE (CASURECO II) & THE LOCAL GOVERNMENT OF NAGA CITY, CTA EN BANC CASE NO. 2941, JANUARY 23, 2026]

THE MERE PAYMENT OF A COMPROMISE PENALTY DOES NOT AUTOMATICALLY RESULT IN THE CASE’S DISMISSAL

The Petitioner, James Alekhine Yap Tan, filed a Petition for Review seeking to overturn the Regional Trial Court (RTC) Decision affirming his conviction for failure to obey summons under Section 266 of the Tax Code. He argued that the Subpoena Duces Tecum (SDT) issued against him was unconstitutional for lack of particularity and materiality, therefore amounted to an unreasonable search. Also, the Letter of Authority (LOA) was invalid due to the Bureau of Internal Revenue’s (BIR) failure to revalidate it after the expiration of the 120-day validity period. Lastly, his payment of the compromise penalty prior to the filing of the criminal case should have resulted in the dismissal of the charges. On the other hand, the Respondent Prosecution countered that the SDT was sufficiently specific and material, as it enumerated documents directly related to the tax audit covered by the LOA. It is likewise argued that revalidation of the LOA was no longer required, as the revalidation rule was no longer in effect at the time the audit investigation commenced. Further, the payment of the compromise penalty for failure to obey summons does not justify the withdrawal or dismissal of the criminal case. In its ruling, the CTA En Banc upheld the validity of the SDT, finding that the list of documents required was specific, relevant to the audit, and compliant with the requirements of Rule 21 of the Rules of Court. Also, the LOA remained valid despite the absence of revalidation, clarifying that the 120-day revalidation requirement had already been repealed under BIR Revenue Memorandum Order (RMO) No. 44-2010. Consequently, failure to revalidate did not render the LOA void. Moreover, the payment of the compromise penalty did not result in the dismissal of the criminal case. A valid compromise requires the mutual consent of both the taxpayer and the BIR, and that payment alone does not consummate a compromise agreement nor extinguish criminal liability in the absence of proof of such agreement. The Petition was therefore DENIED. [JAMES ALEKHINE YAP TAN VS PEOPLE OF THE PHILIPPINES, CTA EN BANC CRIMINAL CASE NO. 167, JANUARY 22, 2026]

[FRANCHISE HOLDER "IN LIEU OF ALL TAXES" CLAUSE INCLUDES TAXES IMPOSED BY THE LOCAL GOVERNMENT ON PROPERTIES USED IN CONNECTION WITH THE FRANCHISE] [FRANCHISE HOLDER PAYMENT OF FRANCHISE TAX EXEMPTS IT FROM PAYMENT OF REAL PROPERTY TAXES ON PROPERTIES USED IN CONNECTION WITH ITS FRANCHISE]

Petitioner National Grid Corporation of the Philippines (NGCP) filed a Petition for Review seeking to reverse and set aside the Decision and Order of the Regional Trial Court (RTC), Branch 9, Tacloban City which denied the Petitioner’s request for the cancellation of the assessment for Contractor’s/City Tax imposed by the Respondent City Government of Tacloban. Petitioner argued that stare decisis does not apply because this case involves different facts and evidence, including proof of consistent payment of the 3% Franchise Tax. It further claims that the Supreme Court has reversed the earlier NGCP ruling relied upon by the RTC, making the tax assessment improper. Meanwhile, the Respondent acknowledged the Supreme Court’s ruling, which held that NGCP is not liable for local taxes upon proof of payment of the 3% Franchise Tax and that the CTA En Banc erred in refusing to admit such evidence. Considering this clear ruling, Respondent conceded that its position is no longer tenable. In ruling, the Court held that Petitioner is exempt from local taxes under Republic Act (RA) No. 9511 known as the “NGCP Franchise” upon proof of payment of the 3% Franchise Tax on its gross receipts, as established in NGCP v. Oliva, and in the present case, the Petitioner presented unchallenged BIR Certifications and Forms showing payment of the 3% Franchise Tax from 2009 to 2023, which Respondent did not dispute, thereby satisfying the burden of proof and justifying exemption from Contractor’s/City Tax. Consequently, the Petition was GRANTED, and the assailed Decision and Order were hereby REVERSED and SET ASIDE. [NATIONAL GRID CORPORATION OF THE PHILIPPINES VS. CITY GOVERNMENT OF TACLOBAN, CTA AC NO. 349, JANUARY 7, 2026]

[AN ASSESSMENT ISSUED AFTER THE THREE-YEAR PRESCRIPTIVE PERIOD IS NO LONGER VALID & EFFECTIVE] [MERE STATEMENT IN THE FLD THAT 50% SURCHARGE WAS IMPOSED DOES NOT CONSTITUTE A CLEAR INVOCATION OF THE EXTRAORDINARY 10-YEAR PRESCRIPTIVE PERIOD] [TO PROVE DELIBERATENESS OR WILLFULLNESS OF THE ERROR OR MISSTATEMENT, CLEAR & CONVINCING EVIDENCE MUST BE PRESENTED, ABSENT SUCH PROOF, TEN (10)-YEAR PRESCRIPTIVE PERIOD CANNOT BE INVOKED]

Petitioner Justice Maria Lourdes P.A. Sereno filed a Petition for Review seeking to cancel and set aside the Respondent Commissioner of Internal Revenue (CIR)’s Final Decision on Disputed Assessment (FDD) and Formal Letter of Demand (FLD) for alleged deficiency VAT for taxable year 2005. Petitioner contends that the deficiency Value-Added Tax (VAT) assessment has prescribed and is void for lack of a valid Letter of Authority (LOA), due process violations, and absence of factual and legal basis. In any case, she argues that no deficiency VAT is due as she properly reported and paid the VAT for the period involved. On the other hand, the Respondent counters that the assessment is valid as it was timely issued pursuant to a valid LOA, complied with due process and equal protection, sufficiently stated the factual and legal bases, and thus renders Petitioner liable for the assessed deficiency VAT. In ruling, the Court held that in the absence of proof of fraud or falsity, the assessment should be governed by the ordinary three-year prescriptive period under the Tax Code, which, in this case, had already expired before the issuance of the FLD and FDDA. The extraordinary ten-year prescriptive period was held inapplicable because the BIR failed to clearly invoke it, failed to disclose the factual and legal bases and computations required by law and jurisprudence, and failed to prove intentional falsity, thereby rendering the deficiency VAT assessment void for having been issued beyond the prescriptive period. Consequently, the Petition was GRANTED, and the undated FDDA and FLD were CANCELLED, REVERSED and SET ASIDE. [JUSTICE MARIA LOURDES P.A. SERENO VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 10793, DECEMBER 26, 2025]

FAILURE TO ESTABLISH A NEXUS BETWEEN THE EXCISE TAX PAID & THE IMPORTED FUELS SOLD TO TAX EXEMPT ENTITIES IS A GROUND FOR DENIAL OF TAX REFUND CLAIM

Petitioner SL Harbor Bulk Terminal Corporation filed a Petition for Review challenging the CTA Special First Division’s ruling denying its request for the issuance of a Tax Credit Certificate (TCC) for alleged erroneously paid excise tax. The Petitioner contended that the Court in Division erred in computing the two-year prescriptive period for filing a refund claim from the date of excise tax payment rather than from the date of sale to tax-exempt entities and further argued that the Division disregarded the evidence it had presented. Contrarily, the Respondent, Commissioner of Internal Revenue, argued that the judicial claim was filed beyond the two-year period prescribed under Sections 204 and 229 of the Tax Code, and that the Petitioner failed to establish its entitlement to a tax credit or refund. In ruling, the CTA En Banc upheld the Division’s ruling, reiterating that the two-year prescriptive period for filing a judicial claim for refund must be reckoned from the date of payment of tax, pursuant to Sections 204 and 229 of the Tax Code. Consequently, the Petitioner’s claim for refund was not filed within the statutory prescriptive period. Additionally, the Court noted that the Petitioner failed to substantiate its entitlement to a refund, as it only submitted Official Registry Books (ORB) for June and September 2018, instead of the required ORB for July and August 2018 pursuant to Section 41 of the Revenue Regulations (RR) No. 13-77. These records were necessary to verify whether the Bunker Fuel Oil (BFO) and Special Fuel Oil (SFO) sold to tax-exempt entities were the same petroleum products on which excise taxes were paid in August 2018. Thus, the Petition was DENIED for lack of merit, and the assailed decision of the Court in Division was AFFIRMED. [SL HARBOR BULK TERMINAL CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2982, DECEMBER 23, 2025]